Sustaining momentum: 2016 European Alternative Finance Industry Survey

2016 KPMG European Alternative Finance Industry Survey

2nd Annual European Alternative Finance Industry Survey, benchmarking the 2016 European crowdfunding and peer-to-peer lending markets.

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Newton's cradle five pendulum balls

This reports shows that the alternative finance sector is set to continue to grow and mature.

2016 marks a significant year for “alternative finance” in Europe as the market demonstrates clear signs of continued strong growth and increased maturation in the sector as a whole. European activity excluding the UK, showed solid growth of 72 percent and demonstrated client demand for alternative finance solutions even in the smaller EU countries.

Market evolution

Amidst this growth there are indications that a number of important factors are shaping that growth as the market matures including investor concerns about loans to riskier borrowers, the impact of interest rate rises on business model sustainability and increased regulatory scrutiny designed to provide a level playing field for all competitors in the financial marketplace. This the normal course of evolution for a new market and we see a pattern of consolidation and adapting business models taking hold. In the course of this evolution we expect that the strongest players will continue to grow their customer base and become the defacto standard for the millennial demographic in the coming years.

Embracing alternative finance

There is also evidence that this evolution is already leading to partnerships between Alternative Finance platforms and Banks who are moving to take a stake in the platforms themselves and referencing new customers that they don’t plan to support through their traditional in-house products. This balanced approach will allow banks to benefit from platform growth while maintaining customer loyalty.

At the same time, some incumbents have are more actively embracing alternative finance solutions within their own operations and in some instances such as Goldman Sachs who have already launched an in-house online lending platform, the second venture into Retail Banking following its online savings accounts solution. All in all, the activity highlights the viability of alternative finance platforms being able to generate both cost savings and growth opportunities for incumbents and challengers alike. Both are signs of continued growth and strength in the Alternative Finance market.

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